Waynes World - May 2005

EVIDENCE OF INSURANCE (MCS 90), PROOF OF A
SURETY BOND (MCS 82), AND...

EXPLAINING THE DIFFERENT
TYPES OF LEASES
By Wayne Schooling

A: The Form MCS 90 is an endorsement issued to a carrier by an insurance company to show proof that the carrier has in effect the minimum levels of financial responsibility required by the FMCSA under 49 CFR 387.09. The MCS 90 is not an actual insurance policy, serving only as proof that the carrier is in compliance with the FMCSA’s requirements that carriers maintain coverage for protection of the public for injury or property damage resulting from the operation of the vehicle. The FMCSA determines the form and content of the MCS 90 endorsement and provides a sample in 387.15. However, the insurance company is the only one that can issue the MCS 90 and it must do so directly to the carrier, who must keep it at their principal place of business as required by 387.7(d). Don’t expect your agent or broker to supply you with this form – they simply cannot. They can only request that it be issued, so my advice is, if you do not have one do not wait until the last minute. The top fine that was issued for not having an MCS 90 was for $24,600 (the average fine is about $3,500). An MCS 90 must be in the motor carrier’s office if they are required to file evidence of financial responsibility with the FMCSA in the amounts listed in 387.9. If you are not required to file evidence of financial responsibility, then you do not have to maintain one (see next question).

Q: Can I get a surety bond or self-insure to satisfy public liability requirements? Luis M., New York, NY.

A: Carriers meeting the public liability requirements with a surety bond must have a MCS 82 issued by a surety as evidence of compliance with 387.9. The FMCSA includes a sample Form MCS 82 in 387.15, but the document must be issued directly to the carrier from a surety company. The MCS 82 serves as proof of a surety bond, just as the MCS 90 provides evidence of insurance. Certain carriers are self-insured under 387.309; for these motor carriers, a written decision, order or direct authorization from the FMCSA authorizing a motor carrier to self-insure will satisfy the proof of financial responsibility requirement.

A: A lease arrangement may last for a single trip or an entire year (or more). The kind of lease agreement you need depends upon the nature of the leasing you intend to conduct. All agreements must comply with the leasing regulations found in part 376. A STANDARD TRIP LEASE AGREEMENT is used for a single trip or a lease of short duration. This agreement is a preprinted form on which the required information is entered; it also has provisions for designating the exact time the lessee took possession of the equipment, and the exact time the lessee released the equipment. Standard terms and conditions are usually printed on the back of the form and, with the information on the face of the trip lease contract, meet the leasing requirements in Part 376. A MASTER LEASE AGREEMENT may be used for the on-going, intermittent trip leases with the same lessor/owner. The Master Lease consists of two documents: the Master Lease Agreement and the Master Lease Supplement and Equipment Receipt. Used together, the leasing requirements in Part 376 are satisfied. The master lease is drawn up to detail the overall terms of the agreement and lists the equipment that may be used for a trip lease between the same lessee and lessor. This allows an individual trip lease to take place without drawing an entirely new agreement for each trip. When a trip actually takes place, a Master Lease Supplement and Equipment Receipt must be executed setting forth the actual time and date of the beginning and end of the trip. In both a Standard Trip Lease and Master Lease situation, the lease begins when the lessee takes possession of the vehicle to be leased, and issues a receipt to the lessor. The lease terminates when the lessee returns possession of the vehicle to the lessor and the lessor issues a return receipt to the lessee. When the lease is in effect, the lessee has exclusive possession and use of the leased equipment, and assumes complete responsibility for the operation of the equipment. A PERMANENT LEASE is used when a carrier is leasing equipment that will be exclusively used by the lessee for the term of the lease. The lessee/carrier is the authorized user and is responsible for legal operation of the vehicle for the duration of the lease. A long-term, or permanent, lease agreement is generally a detailed contract, drawn according to individual company requirements and policies (while meeting the requirements for written lease agreements in Part 376). Neither the Standard Trip Lease nor the Master Lease Agreement is suitable for a long-term lease agreement. Carriers engaged in any type of leasing must carry a copy of the lease agreement in the vehicle during the term of the lease unless they carry the Notice of Lease Agreement.

~ Do you have any transportation-related questions you would like me to address? If so, send them care of Wayne Schooling at NorthAmerican Transportation Association, 2533 N. Carson St, Suite 346, Carson City, NV 89706-0147. Or, if you prefer, you can e-mail questions to wayne@ntassoc.com. The NTA is a premier nationwide benefits association established to provide services, benefits and information to private fleets, trucking companies and owner operators. For more details about the NTA, call toll free (800) 805-0040 or visit www.ntassoc.com. Until next month, “Drive Safe - Drive Smart!”